Rodney Leatherman/IBDR, Inc. vs. COMMERCE AND INSURANCE

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1 University of Tennessee, Knoxville Trace: Tennessee Research and Creative Exchange Tennessee Department of State, Opinions from the Administrative Procedures Division Law September 2014 Rodney Leatherman/IBDR, Inc. vs. COMMERCE AND INSURANCE Follow this and additional works at: This Initial Order by the Administrative Judges of the Administrative Procedures Division, Tennessee Department of State, is a public document made available by the College of Law Library, and the Tennessee Department of State, Administrative Procedures Division. For more information about this public document, please contact administrative.procedures@tn.gov

2 Mailed On: BEFORE THE BOARD FOR LICENSING CONTRACTORS FOR THE STATE OF TENNESSEE IN THE MATTER OF: TENNESSEE DEPARTMENT OF COMMERCE & INSURANCE, Petitioner, v. DOCKET NO: J RODNEY LEATHERMAN, dba IBDR, INC., Respondent. INITIAL ORDER This contested case was heard in person in Nashville on August 6, 2014, by Administrative Judge Kim Summers, assigned by the Secretary of State, Administrative Procedures Division, to sit for the Board. Shilina Brown, Assistant General Counsel, represented the Department in this matter. The Respondent represented himself at the hearing, waiving his right to be represented by legal counsel. 1 The issue in this matter is Respondent s alleged violation of the Contractors Licensing Act, Tenn. Code Ann , et seq. and the appropriate penalty to be imposed for any such violation. After consideration of the entire record, it is determined that Respondent s actions have been in violation of the Contractors Licensing Act and that penalties shall issue as further specified below. 1 Mr. Leatherman was informed prior to commencing the hearing that he would not be permitted to act as legal counsel on behalf of IBDR, Inc. He was allowed to participate in the hearing pro se based upon his representation, under oath, that IBDR, Inc., as a corporate entity, no longer existed. At the close of Mr. Leatherman s testimony, he disclosed that IBDR, Inc. s corporate status had, in fact, been reinstated in Nevada.

3 This determination is based upon the following Findings of Fact and Conclusions of Law. SUMMARY OF EVIDENCE Carolyn Lazenby, Executive Director, Tennessee Board for Licensing Contractors, testified that the Respondent has never possessed, or even applied for, a contractor s license in the State of Tennessee. The Respondent conceded that neither he nor his son had a contractor s license in the State of Tennessee. He further testified to the following he had the right to pull a permit for a home being built on his own property; the home would be used as a model for his energyefficient technology and would be used for research purposes. Four exhibits were entered into evidence: EXHIBIT 1, Complaint filed by Steve Baggett; EXHIBIT 2, Response to the Complaint; EXHIBIT 3, August 20, 2013 Cease and Desist Letter; EXHIBIT 4, Contract between IBDR, Inc. and Newell Homes. FINDINGS OF FACT 1. The Department of Commerce and Insurance, Division of Regulatory Boards, ( the Department ) is the lawful agent through which the Contractors Licensing Act is enforced, and the Department is authorized to bring this action. 2. The Respondent has never been licensed as a contractor under TENN. CODE ANN , et seq. 3. The Respondent owns the land and home located at 2746 English Hills Drive in Sevierville, Tennessee. 2

4 4. The home was listed for sale with a real estate agent in October 2012 before the beginning of construction, which was started in or around December The Respondent pulled the permits for this construction which he did himself along with his teen-aged son. 6. On June 25, 2013, the Board provided notice to the Respondent of a complaint that had been filed against him. 7. An investigator for the Board visited the construction sight on August 13, 2013, and learned that work on the home was still in process, notwithstanding the inquiry from the Board about his licensing status. As a result, the Respondent was sent a cease and desist letter on August 20, The Respondent hired a licensed contractor to complete the inside of the house in September 2013, several months after first being notified of the licensing violation. The contractor, who was Respondent s personal friend, was not told that the house was for the Respondent s personal use. The contractor believed that the house would be used as a model. 9. In a conversation with Ms. Lazenby, the Respondent explained that he did not hire a contractor for the construction of the home in question because only he had the requisite knowledge to install his energy-efficient technology. 10. At the time of the hearing, the construction project had cost the Respondent approximately $60,000. The Respondent has paid only about $600 for expenses incurred by his contractor. APPLICABLE LAW 1. RULE (3) of the Uniform Rules of Procedure for Hearing Contested Cases before State Administrative Agencies states, in pertinent part: 3

5 The petitioner in a contested case proceeding is the moving party, i.e., the party who has initiated the proceedings. The petitioner usually bears the ultimate burden of proof. 2. TENN. CODE ANN (a)(1) specifies the following Any person, firm or corporation engaged in contracting in this state shall be required to submit evidence of qualification to engage in contracting, and shall be licensed as provided in this part. It is unlawful for any person, firm, or corporation to engage in or offer to engage in contracting for any project in this state, unless, at the time of such engagement or offer to engage, the person, firm, or corporation has been duly licensed with a monetary limitation sufficient to allow the person, firm, or corporation to engage in or offer to engage in such contracting project under this chapter. The board for licensing contractors shall have the authority to grant or allow an exception, in an amount not to exceed ten percent (10%), to the monetary limitation of such license provided in this subdivision (a)(1). Any person, firm, or corporation engaged in contracting, including a person, firm, or corporation that engages in the construction of residences or dwellings constructed on private property for the purpose of resale, lease, rent, or any other similar purpose, shall be required to submit evidence of qualification to engage in contracting and shall be licensed. It is unlawful for any person, firm, or corporation to engage in, or offer to engage in, contracting as described in this subdivision (a)(1) unless the person, firm, or corporation has been duly licensed under this part. 3. TENN. CODE ANN (a)(2)(A) provides the following exemption (2)(A) Notwithstanding subdivision (a)(1), any person, firm or church that owns property and constructs on the property single residences, farm buildings or other buildings for individual use, and not for resale, lease, rent or other similar purpose, is exempt from the requirements of this part. contractor 4. TENN. CODE ANN (4)(A)(i) provides the following definition for [A]ny person or entity that undertakes to, attempts to or submits a price or bid or offers to construct, supervise, superintend, oversee, schedule, direct or in any manner assume charge of the construction, alteration, repair, improvement, movement, demolition, putting up, tearing down or furnishing labor to install material or equipment for any building, highway, road, railroad, sewer, grading, excavation, pipeline, public utility structure, project development, housing, housing development, improvement or any other construction undertaking for which the total cost is twentyfive thousand dollars ($25,000) or more; provided, however, with respect to a licensed masonry contractor, such term means and includes the masonry portion of the construction project, the total cost of which exceeds one hundred thousand dollars ($100,000), materials and labor; 4

6 5. Tenn. Comp. R. & Regs specifies the following with respect to the licensing requirements for property owners as follows The license exemption stated in T.C.A (2)(A) pertains to any person, firm, church, or other religious institution that owns property and constructs on the property single residences, farm buildings or other buildings for individual use. This exemption does not apply to construction pertaining to resale, lease, rent or other similar purpose. The exemption does not apply to persons constructing buildings for a business-type purpose that cater to and depend upon usage by members of the general public. 6. TENN. CODE ANN permits civil penalties to be assessed as follows (d) Notwithstanding the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, relative to the amount of civil penalties that may be imposed, the board may impose a civil penalty not to exceed five thousand dollars ($5,000) per offense against any person or firm that violates the terms and conditions of an existing license to engage in contracting or against any person or firm that engages in unlicensed contracting. 7. TENN. COMP. R. & REGS (1) provides for the assessment of costs The Division of Regulatory Boards ( Division ) or any board, commission or agency attached thereto is authorized to assess the actual and reasonable costs of the investigation, prosecution and hearing of any disciplinary action held in accordance with the contested case provisions of the Uniform Administrative Procedures Act, compiled in Tenn. Code Ann. Title 4, Chapter 5, Part 3 in which sanctions of any kind are imposed on any person or entity required to be licensed, permitted, registered or otherwise authorized by the Division or any board, commission or agency attached thereto. ANALYSIS and CONCLUSIONS OF LAW 1. It is undisputed that the Respondent commenced construction of a house on his own property and completed the outside of the home before hiring a contractor. 2. The point of contention is the Respondent s intended use of the house; however, there is no evidence in the record the house was ever intended for the Respondent s own personal use. 5

7 3. In fact, there is ample evidence to the contrary the Respondent listed the house with a real estate agent before construction even began, and several witnesses testified that the house would be used as a model and/or for research. 4. Since the house was listed for resale, the Respondent would not be entitled to the individual use exemption provided by TENN. CODE ANN (a)(2)(A). 5. The use of the house as a model would also exclude application of the individual use exemption since Tenn. Comp. R. & Regs prohibits a business-type purpose that caters to the general public. 6. The use of propriety technology does not excuse the Respondent s failure to obtain a contractor s license, nor does the Respondent s apparent belief that he is more capable than the average licensed contractor. 7. The Respondent spent approximately $60,000 on constructing the house prior to hiring a contractor, thus he exceeded the $25,000 threshold in TENN. CODE ANN (4)(A)(i) for which a license is required. 8. The evidence presented in this matter did not show that the Respondent was unaware of the licensing requirements but that he believed that this requirement should not apply to him, even after being informed otherwise. This belief persisted throughout the hearing. 9. Because the Respondent was not properly licensed during the construction of the home in question, the Department HAS shown by a preponderance of the evidence a violation of TENN. CODE ANN (a)(1) by the Respondent. 10. Based upon the foregoing, a civil penalty is assessed against the Respondent in the amount of $5,000 pursuant to TENN. CODE ANN

8 11. Costs, consistent with this order, shall be assessed against the Respondent, pursuant to TENN. COMP. R. & REGS (1). It is so ORDERED. This INITIAL ORDER entered and effective this the day of DKSummers KIM SUMMERS ADMINISTRATIVE JUDGE ADMINISTRATIVE PROCEDURES DIVISION OFFICE OF THE SECRETARY OF STATE Filed in the Administrative Procedures Division, Office of the Secretary of State, this the day of J. RICHARD COLLIER, DIRECTOR ADMINISTRATIVE PROCEDURES DIVISION OFFICE OF THE SECRETARY OF STATE 7